Apply For a Mortgage in 2008 – A Primer For First Time Home Buyers

Over the last year, the mortgage industry has gone through a tremendous amount of turmoil. Some banks cut back drastically on the loan programs they offered. Others added some more stable loan products to replace the ones they discontinued. Still other banks just went out of business all together. For some people, it is hard to know if purchasing their first home is even possible. Hopefully, the next few paragraphs will be useful to help the First Time Home Buyer wade through all the mire and muck of mortgage lending and give them the opportunity to realize the American Dream of home ownership.

What should the First Time Home Buyer be prepared for when applying for a mortgage?

1. Know what your credit report looks like. Over the last six years I have learned that this tends to be the biggest surprise to many borrowers. Credit is misunderstood by many and they find that their credit history is nothing like they thought it would be. By law, you are entitled to a free copy of your credit report from all three reporting bureaus (Transunion, Experian, Equifax) once per year. You will not receive your credit scores for free but you will be able to know what is on your credit. For more information on the importance of your credit history, see “Need to Improve Your Credit?”
2. Be prepared to document everything! This is the one area that I have found many First Time Home Buyers are not prepared for. Buying a home is worlds apart from buying a new car or a new appliance. Purchasing a home carries with it many possibilities for things to go wrong for you or for the bank. Because of this, you need to be able to verify your income, the source of the money you plan to use for down payment and/or closing costs, the causes behind any blemishes on your credit report and even your identity. Don’t get upset when these things happen. The bank is only trying to protect you as well as themselves.
3. Be prepared to experience a little frustration! No one wants to be frustrated. However, when it comes to purchasing a home, inevitably something is going to take longer than you think it should. I always tell my clients that the next 45 to 60 days are going to be the most frustrating days they have ever been through. If and when they are frustrated, it is just as I said it would be. If things go smoothly and they don’t get frustrated then they love me even more. Just remember, when you are sitting in your favorite recliner in the family room of your very own home, any frustration you may have experienced will seem to have been worth it all.
4. Expect to be treated with dignity and respect. You should expect this from your realtor, your loan officer, your attorney and everyone else involved in the transaction. If you are not getting this, it is either time to fire someone who is working for you (your realtor, loan officer or attorney) or find a new home to buy and get away from the property you first choose. We are all human and we all deserve respect and dignity.
5. Always, Always, Always get a Home Inspection. This is designed to protect you from any surprises with your new home. You do not want to purchase your home and find out six months later that there is a problem with water leaking underneath the sliding glass patio door and find out you have rotten wood that needs to be replaced. A good home inspector will find that kind of thing before you buy so you don’t get stuck with it. Believe me, I know what that is like.
6. If you have a question about something during the process of the loan application or anything else that comes up before closing, ASK! The only stupid question is the question that doesn’t get asked. This is probably the biggest investment you will make in your lifetime. You need to be completely informed before you step into home ownership. After all, it is your money you are investing in it.